PA ANALYSIS: US earnings underline ongoing banks conundrum

Added 14th April 2016

Bank of America and Wells Fargo followed JP Morgan’s lead on Thursday, reporting a sharp drop in quarterly earnings, largely on the back of bad loan provisions, in the energy space.

PA ANALYSIS: US earnings underline ongoing banks conundrum

Bank of America profits falling 18% was largely in line with the market’s rather low expectations however, so shares in the bank were up over 2% in morning trade in the US.

Similarly, JP Morgan may have reported a 7% decline in its profits but this was significantly better than expected. And, while Wells Fargo shares were trading lower, albeit less than 1% and, its earnings were also roughly in line with analyst expectations.

The reason for this is that in all three cases the provisions were made for loans made in the energy space, in particular to oil and oil-related companies. And, as a result, given the commodities slump the provisions were expected.

In a note out on Tuesday, Twentyfour Asset Management CEO, Mark Holman, said the firm was expecting headline numbers from all three of those that have already reported and Citigroup, which reports on Friday, to be disappointing.

According to Holman, the reasons for these expectations, so far borne out, were the tough trading conditions within investment banking in the first two months of the year, elevated risk premiums curtailing deal flow, restructuring and (further) litigation expenses and increased provisioning in the energy, metals and mining sectors.

"While not in as much trouble as they once were, the banking sector is by no means out of the woods."

Of the three, Wells Fargo, reported declines across its three businesses, while JP Morgan and BoA reported growth in their consumer businesses, albeit not enough to offset the provisions within its trading divisions.

Kames Income Hub


Vincent McEntegart, manager of the Kames Diversified Monthly Income Fund, explains how he aims to deliver a stable and sustainable income of 5% p.a.*, paid monthly, by investing in a range of asset classes

Square Mile Research

Lazard Emerging Markets
Lazard Emerging Markets

Talking Factsheets is a video service for users...

Visitor's Comments Add your comment

Add Your Comment

We won't publish your address

About Author

Geoff Candy

Group digital editor

Geoff Candy joined Portfolio Adviser as News Editor in May 2014. He has been a financial journalist and broadcaster since 2005 and, in that time has worked in both South Africa and the Netherlands, covering everything from high street retailers and construction companies to mining and insurance.



Investment Strategy




PA Channel Island 2016
PA Channel Island 2016

8th November 2016
The Royal Yacht, Jersey


17th November 2016
The Andaz

PA Emerging Markets 2016
PA Emerging Markets 2016

1st December 2016
The Mayfair, London

Sponsored Content

Investment Strategy